Local Interest Rates Likely To Drop 1% This Year

[george]

Local interest rates likely to drop 1% this year

BANGKOK: -- Local interest rates are expected to drop by around one percentage point this year along with a global interest rate decline, according to a top banker.

Siam Commercial Bank president Jada Wattanasiritham and Chairman of the Thai Bankers' Association said Friday that global interest rates will tend to fall this year and so will local interest rates.

Khunying Jada said she saw no factors that could push interest rates up this year. Given existing factors, interest rates are likely to stay still or edge down sooner than expected.

The interest rates might begin to drop in the first half of this year and fall by around one percentage point for the whole of the year.

Lending rates are projected to move in the same direction as deposit rates.

She said SCB had not yet adjusted its business performance plan, but it will particularly monitor and assess the impacts of the New Year's Eve bombings in Bangkok for a time.

--TNA 2007-01-05

[womble]

should have dropped them earlier if they wanna weaken the baht......

The economy is headed for bad times, doubt this will be enough.

[astral]

I was under the impression that interest rates were on the way up, not down......... ??

US$ and GBP seem to be heading up slowly.

[samtam]

I agree. That maybe why there was a baht crisis. Thai banks have a very different view of the world economy. However, if things go pear-shaped, interest rates may have to rise here too. There wont be any worry about the baht being overvalued.

[Meerkat]

One of the problems here though is inflation. CPI is already running at 3.5%, so real interest rates are only at about 1.75%. Add to that at least one manufacturing sector recently complaining about the lack of labour (and Thailand being positioned as having the lowest global rate of unemployment), and you can see the potential for inflation. I have no idea how much domestic consumption is imported, but if it's a significant percentage then of course a weaker baht as the BOT wants will mean imported inflation too, which hardly helps matters.

Rocks and hard places.

[bkkandrew]

One of the problems here though is inflation. CPI is already running at 3.5%, so real interest rates are only at about 1.75%. Add to that at least one manufacturing sector recently complaining about the lack of labour (and Thailand being positioned as having the lowest global rate of unemployment), and you can see the potential for inflation. I have no idea how much domestic consumption is imported, but if it's a significant percentage then of course a weaker baht as the BOT wants will mean imported inflation too, which hardly helps matters.

Rocks and hard places.

That figure is a nonsense anyway, just like the fiction published elsewhere. The real inflation figure is probably nearer 7% YTD...

[Meerkat]

That figure is a nonsense anyway, just like the fiction published elsewhere. The real inflation figure is probably nearer 7% YTD...

Can you explain that number? I'm not necessarily discounting it, but I'm just going with data from The Economist. If real interest rates are already so deeply negative, why has so much money been flowing in to the country?

[Jai Dee]

Thai Bankers Association President expects interest rate in 2007 to decline by 1 percent

Khunying Chada Wattanasiritham (ชฎา วัฒนศิริธรรม), the President of the Thai Bankers Association and Siam Commercial Bank managing director, reveals the interest rate in 2007 tend to decrease according to the direction of the global interest rate.

Khunying Chada said besides that there are no factors in the country leading to an increase in the rate. The decrease is expected to begin in the first quarter of the year with the overall interest rate probably decreasing by 1 percent.

In addition, Khunying Chada revealed the Siam Commercial Bank currently has no intention to adjust business plans since the bank would wait for some time to gauge the effects from the bombings in Bangkok.

Source: Thai National News Bureau Public Relations Department - 06 January 2007